BMI filed the lawsuit at the U.S. Southern District Federal Court in New York yesterday. It's even seeking help from a federal rate court, which will decide how much Pandora will pay BMI members in royalty rates.

This situation stemmed from Pandora's purchase of a small radio station -- KXMZ-FM -- located in Rapid City, South Dakota. Pandora announced the purchase just two days before BMI launched the lawsuit.

BMI is accusing Pandora of buying the radio station so that it can enjoy the reduced royalty rates that terrestrial radio broadcasters receive. BMI gives terrestrial radio stations a bit of a break because of the higher fees these stations pay for on-air broadcasts. BMI said Pandora, on the other hand, is primarily an Internet service and shouldn't qualify for the discount that terrestrial radio stations receive just because it bought one tiny radio station in South Dakota.

"The action asks the court to set reasonable, market driven fees for Pandora after negotiations did not result in an agreement," said BMI. "BMI represents the public performance copyright interest of its affiliates when their works are played across all venues including the internet, cable, broadcast television and radio, satellite and in nightclubs, bars and other commercial establishments.

"This is the first time the organization has resorted to litigation on fees in the digital arena in the 18 years since it signed the first music industry copyright license for the performance of music on the internet."

BMI and Pandora had an agreement from 2005 to 2012. The contract ended October 2012, and when BMI sought a new contract, Pandora declined. BMI was looking for higher royalty rates due to the growth of online music streaming and market rates. Also, other music publishers -- such as Sony ATV Music Publishing -- left BMI last year to strike a deal with Pandora, leaving BMI with even less cash in its pocket. Sony reportedly got 25 percent more money with Pandora than it was receiving through BMI.

Around the time of the contract termination with BMI last year, Pandora also went to a federal rate court to drop the amount it owes to the American Society of Composers, Authors and Publishers (ASCAP).

"We look forward to the court's oversight of this matter," said Pandora spokeswoman Mollie Starr.

If BMI left this gaping loophole open, then I agree with you, Pandora is doing right by their investors. However, if there is no loophole and Pandora is blatantly taking an adversarial tactic, then F-em.

According to Priya on Big Bang Theory, a dispute over ambiguity in a contract benefits the party whom did not draft the contract.

I would think it would come down to whether Pandora Inc., or whatever it's called, is the direct owner/operator of the radio station, or if it is still operated under a subsidiary. If Pandora is directly involved, then the discount would likely apply to them as a whole, if it is under a subsidiary, the discount applies to that firm's operations only.